The new Business Bank hopes to turn £1 billion of taxpayer’s money into £10 billion of funding support for SMEs, but more than ten times this amount (an estimated £100 billion of finance) could already be sourced directly through business owner pension funds, according to pension specialist Clifton Asset Management.
Chairman of Clifton Asset Management Adam Tavener says, ‘We welcome the launch of the Business Bank, and actually feel that it could be quite effective for large companies as it is based on the German state-backed bank KfW, which has proved that it is very effective at providing finance to growing German companies.
‘However, there is a much bigger pot of funding available for SMEs – and it’s directly available through owner manager pension funds. It also comes without the need for personal guarantees or a charge over a personal asset such as a director’s home. This leaves the business owner in complete control of his or her destiny, without the threat of losing a personal asset, or being made bankrupt.’
Clifton is also calling for the government to encourage the banking sector to work with alternative funding providers to increase the number of loans made to the SME sector.
Tavener adds, ‘Recent research has suggested that tighter capital rules are restricting the volume of bank loans made to SMEs, but if banks work in collaboration with other lenders, businesses can receive their required level of funding, and the banks will get more of their loans away.’
DMACK Tyres needed £150,000 to fund the production of its own-brand tyres to the UK market. Clifton worked with the director of DMACK to arrange £75,000 of finance from his personal pension scheme, offset against the value of the Intellectual Property (IP). The remaining £75,000 required was then provided from his bank.